For the seventh straight month, the Creighton University Rural Mainstreet Index (RMI) remained above growth neutral based on the monthly survey of bank CEOs in rural areas in a 10-state region dependent on agriculture and/or energy.
The overall index for June was a strong reading of 70.0, down slightly from May's record high of 78.8. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
Approximately, 46.7% of bank CEOs reported that their local economy expanded between May and June. "Strong grain prices, the Federal Reserve's record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic levels," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.
However, several bankers raised future concerns. Steve Simon, CEO of South Story Bank and Trust in Huxley, Iowa, reported, "Continued dry conditions will start to have an effect on markets and crops soon."
Bankers were asked to name the greatest threat to 2021-22 bank operations. One-in-four named rising government spending, along with inflation, as the greatest threat.
Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, named another concern stating that, "In my view, $29,000,000,000,000 in total debt with no real plan to reduce that debt, or balance the annual budget is the biggest threat to our economy's success." He argues that neither political party, nor the Federal Reserve, has engaged in a serious discussion to solve the problem.
For a ninth straight month, the Farmland Price Index advanced significantly above growth neutral. The June reading slipped to a very strong 75.9 from May's 78.1. This is first time since 2013 that Creighton's survey has recorded nine straight months of farmland prices above growth neutral.
The June Farm Equipment Sales Index rose to 71.6 from 67.9, its highest level since 2012, and up from May's 67.9. After 86 straight months of readings below growth neutral, farm equipment sales bounced into growth territory for the last seven months. This is the best growth in this index since 2012.
EDITOR’S TAKE:
This is a positive report overall. It appears that the major concerns are the weather, along with Washington, D.C. spending and regulation. The weather conditions, in at least part of the RMI territory, are lessening with timely rains in these areas. While that doesn’t completely eliminate the impact of drought, it certainly helps.
However, it's no secret that inflation is rearing its ugly head, which, of course, impacts consumer buying decisions. Historically, the agriculture industry remains strong when the the general economy is somewhat weaker. As evidenced by the Farmland Price Index and the Farm Equipment Sales Index, farmers ARE in a buying mood and are likely to be your best customers 3, 6 and 10 months from now.
So, at times like this, CAD dealers should stay ahead of the game and focus on targeting farmer/rancher customers who are capable of buying a lot of trucks! This is especially timely with OEM's recovering from shortages and sending more inventory to your lots in the weeks and months ahead.
